May 15, 2006 - On April 13, 2006, Judge Wilfred Carter of the Fourteenth Judicial District Court, Parish of Calcasieu, State of Louisiana, denied the motion for partial summary judgment of Colonia Insurance Company (“Colonia”) that pre-tender defense costs were not covered in In Re:  EDC Contractor Insurance Litigation, Docket No. 98-1984.

This litigation arises out of thousands of personal injury claims brought against ConocoPhillips Company, successor-by-merger to Conoco Inc. (“ConocoPhillips”), and others, for alleged exposure to discharged ethylene dichloride (“EDC”) at ConocoPhillips’s Docks Facility in Westlake, Louisiana.  In the lawsuit, ConocoPhillips has sought insurance coverage as an additional insured under the insurance policies sold to various contractors hired by ConocoPhillips to assist it in the cleanup of the discharged EDC, which ConocoPhillips discovered in late March 1994.  Colonia insured one of those contractors, Sulphur Electric.  ConocoPhillips was represented by Anderson Kill & Olick, P.C. and G. Andrew Veazey of Huval, Veazey, Felder & Aertker.  Colonia was represented by and Peter L. Hilbert, Jr. and Joshua S. Force of Sher Garner Cahill Richter Klein & Hilbert, L.L.C.In its motion, Colonia argued that it did not receive notice of ConocoPhillips’s claim until the second half of 2004, when it was served with an amended complaint in this matter.  Colonia argued that it could not be held responsible to pay defense costs incurred by ConocoPhillips prior to when Colonia was served with that amended complaint.  ConocoPhillips opposed the motion on several grounds.  First, ConocoPhillips argued that Colonia’s motion, in essence, was a motion for summary judgment on late notice, not merely pre-tender defense costs.  ConocoPhillips pointed out that Colonia had not paid any defense costs after it allegedly received notice, thereby exposing its true intentions.  Second, ConocoPhillips asserted that Colonia received constructive notice back in 1999, when ConocoPhillips sent a letter to Sulphur Electric advising it of the claims being made against ConocoPhillips and asking Sulphur Electric to give notice to its insurance companies.  Third, ConocoPhillips contended that, under Lousiana law, to avoid paying pre-tender defense costs, an insurance company must demonstrate that it suffered prejudice because of the timing of the notice.  ConocoPhillips noted that Colonia had not even asserted, let alone attempted to demonstrate, any such prejudice, and that it could not in any event because, even after it allegedly received notice, it denied the claim.  In other words, it acted no differently irrespective of the timing of the notice. Ruling from the bench, Judge Carter denied Colonia’s motion.  He rested his decision on two principal bases.  First, Judge Carter stated that there were genuine issues of material fact regarding whether Colonia had received constructive notice of the claims in 1999 when its policyholder, Sulphur Electric, received a letter from ConocoPhillips requesting that Sulphur Electric give notice to its insurance companies.  The Court observed that other of Sulphur Electric’s insurance companies received notice, and that fact issues remained regarding notice to Colonia.  In addition, Judge Carter agreed with ConocoPhillips that an insurance company must demonstrate that it was prejudiced by the timing of notice to avoid having to pay pre-tender defense costs.  The court ruled that genuine issues of material fact remained regarding whether Colonia suffered such prejudice.  Accordingly, because those factual issues remained, the court denied Colonia’s motion.  The In Re: EDC decision is a major victory for policyholders.  Some courts have held that pre-tender defense costs are not covered, which is a potentially devastating result for a policyholder, particularly additional insureds, such as ConocoPhillips, which may not have all the information necessary to give notice to all potentially responsible insurance companies until after they begin incurring defense costs.  For more information, please contact:Carol A. UeckermanCommunications/Marketing Managercueckerman@andersonkill.com(212) 278-1339 To read the decision, please click here